Which of the following statements is correct?
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A firm with low business risk is less likely to increase its use of financial leverage than a firm with high business risk, assuming all else is equal.
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There is no reason to think that changes in the personal tax rate would affect firms’ capital structure decisions.
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In general, a firm with high operating leverage also has a large proportion of its total costs in the form of fixed costs.
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Suppose a firm has less than its optimal amount of debt. Increasing its use of debt to the point where it is at its optimal capital structure will decrease the costs of both debt and equity financing.